Investor Presentation January 2018
Cautionary Notes This presentation contains forward looking statements. All statements other than statements of historical facts contained in this presentation, including statements regarding our future results of operations and financial position, industry dynamics, business strategy and plans and our objectives for future operations, are forward looking statements. The words may, will, should, expects, plans, anticipates, could, intends, targets, projects, contemplates, believes, estimates, predicts, potential or continue or the negative of these terms and similar expressions are intended to identify forward looking statements. The forward-looking statements in this presentation are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including without limitation our ability to maintain and realize the full value of our license agreements; the ongoing level of popularity of our products with consumers; changes in the retail industry and markets for our consumer products; our ability to maintain our relationships with retail customers and distributors; our ability to compete effectively; our dependence on content development and creation by third parties; our ability to develop and introduce products in a timely and cost-effective manner; risks relating to intellectual property; our ability to attract and retain qualified employees and maintain our corporate culture; risks associated with our international operations; changes in U.S. tax law; foreign currency exchange rate exposure; economic downturns; our dependence on vendors and outsourcers; risks relating to government regulation; risks relating to litigation; any failure to successfully integrate or realize the anticipated benefits of acquisitions or investments; reputational risk resulting from our e-commerce business and social media presence; risks relating to our indebtedness and our ability to secure additional financing; the potential for our electronic data to be compromised, and the important factors discussed under the caption Risk Factors in our Form 10-Q for the quarter ended September 30, 2017 and our other filings with the Securities and Exchange Commission.. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. In addition, statements that we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date hereof, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. You should read this presentation with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this presentation, and except as otherwise required by law, we do not plan to publicly update or revise any forward-looking statements contained in this presentation, whether as a result of any new information, future events or otherwise. Unless otherwise indicated, information contained in this presentation concerning our industry, competitive position and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data, and our experience in, and knowledge of, such industry and markets, which we believe to be reasonable. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described above. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. 2
The Fans & Consumers Come First Nearly everyone in the world is a fan of pop culture Because pop culture is everywhere with movies, TV shows, video games, sports, books, anime, etc. So Funko will always put the fans and consumers first Our mission is to create amazing products and experiences that empowers fan expression through pop culture 3
Overview Video 4
Connecting Fans, Licensors and Retailers Fans & consumers have given us permission to be their premier pop culture purveyor Licensors trust us to connect their brands with fans Retailers trust us to curate the most exciting and relevant products for selling World class companies want to work with us to create innovative digital experiences 5
Fueling the Pop Culture Lifestyle toys collectibles apparel & accessories social network homewares experiences media digital 6
How We Do This 1 2 3 4 5 6 7 Ever Increasing Array of Products Broad Consumer Appeal Deep Fan Engagement Diversity of Licenses World Class Speed to Market Evolving Distribution Strategy Digital Innovation 7
Array of Fun, Whimsical & Uniquely Stylized Products Categories of products 8
Broad Consumer Appeal 51% Female 49% Male WOMEN MEN GIRLS BOYS Collectors, Enthusiasts & Mainstream Consumers 9
Lifetime Opportunity 10
Deep Fan Engagement Social Experiences Digital 11
Diversity of Licenses licenses with over 110 content providers covering over 1,000 licensed properties [MGM] Content providers whose properties were associated with products sold in 2016 12
Diversified Mix of Properties that is constantly changing 400 active properties that we produced and sold products against in 3Q17 no single property made up more than 10% of 3Q17 Sales EVERGREEN 44% TELEVISION 14% THEATRICAL 27% GAMING 14% 13
World Class Speed to Market ability to have a new figure on the store shelf in as few as 70 days low development cost of between $5,000 to $7,500 per new figure Illustrative New Product Development Process (Excludes Shipping Time) 1 2 3 4 Time Frame: 24 Hours Time Frame: 45 Days Time Frame: 15 Days Time Frame: 15 Days Develop Initial Design and Submit to Licensor Develop Mold and Prototype Receive Final License Approval Sourced from Asian Facilities While Maintaining Quality Control Variable supply chain and distribution capabilities help drive our speed to market 14
Diverse & Evolving Distribution Strategy Established Channels Specialty Stores International Distributors Mass Market Emerging Channels Retailer Ecommerce New Chains Direct & Digital.com in 2016, not one customer accounted for more than 12% of sales 15
Significant Global Growth Opportunities 2016 Global Market for Licensed Merchandise 1 Global Market Size ~$263 billion U.S. / Canada $152 B Western Europe $52 B N. Asia $24 B RoW $34 B 1 LIMA Global Licensing Survey in 2016, international sales accounted for only 20% of Funko s total sales 16
Digital Innovation Funko Mobile App discover Funko and over 12K Products Funko.com evolving into a Pop Culture Hub Pop! Yourself Funko s custom avatar builder with over 1M options Digital Collectibles attracting a new generation with Digital Collectibles nearly 200M downloaded 17
Growing Use of Video to Engage Fans 18
Bringing it All Together 19
Bringing it All Together Funko s products are seen as traffic drivers either in stores or on-line 20
The Model Works Expansive License Portfolio Diverse, Broad Retail Distribution Diverse Consumer Base Over 1,000 licensed properties Available at >25,000 retail locations Average Age: 35 years Theatrical Release Other Male 49% 1% Evergreen/Classic Female 51% 24% 43% Other Current TV 12% 20% Occasional Buyers 31% Current Video Game Enthusiasts 33% Collectors 36% 1 Pie charts represent percentage of 2016 net sales 21
Thank You Funko, Inc. Confidential 22 22